Profile picture for SoCal Engr

"Seller Assist" equates to "REA Representing Un-Qualified Buyer"?

I don't know how often seller's actually make concessions to pay for buyer-incurred costs in a RE transaction, but...

Doesn't this really point to REAs engaging to represent buyers who are not really ready to buy (i.e., not enough money saved to cover their own expenses)? I'm not talking about concessions due to inspection items, etc.

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September 22 2013 - US
We think we've answered this question for you!
 
 

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Profile picture for Dunes ..
Bump for the Our side Their side show
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October 03 2013
Profile picture for SoCal Engr

First,  for those "not keeping score"...

#1 - No. Just because a potential buyer is asking for seller assist, that does not mean the buyer is not prepared to take on their own costs.

#2 - In some cases, it may. But, the question then becomes "Whose job is it to add speed bumps to their buying process?"

#3 - Since REAs are salespeople, their job is to help the client to figure out a way to "make it work".

In response to selected comments from other posts on this thread...

"But, let's go in another direction. How about we establish a Federal Home Buyers Qualification Standard that sets a minimum financial asset level threshold that buyers need to meet in order to buy a home? Would you be in favor of that?"

Personally, I believe that pretty much any bureaucracy will, sooner or later, screw up just about anything they attempt to manage. By nature, legislation has unintended consequences, and often ends up creating loopholes in the process...which then requires more legislation, etc., etc. So, while I do believe that there need to be laws against the most aggregious behaviors, I actually believe that consumers should be free to make their own decisions. Just, please, don't expect others to bail you out.

"So these may be the types of buyers you may be referring to, but again, just because the seller is offering closing cost assistance, doesn't mean the buyer isn't qualified or that the REA is pushing the buyer into something that they shouldn't be doing."

I was unclear. I was not implying that there is any relationship between a seller offering closing cost assistance and the ability of the potential buyers. I was asking if there is a relationship between potential buyers who ask for seller assistance and their actual preparedness to buy. As others have pointed out, the request does not necessarily have any relationship to the buyer's preparedness.

"The thumbs up count is leaning my side's way, hard. I hate to burst anyone's echo bubble, but nobody cares if REA's help people get the most of their financing opportunities. The most telling part of the thread is that the only actual consumer type, that posted, got three thumbs for telling the penny police to stuff it."

Hmmm...It surely wasn't my intent to create an us-v-them environment. Truth-be-told, I see the situation as more of a "we have met the enemy, and we are them" situation.

"The people who care, Hamp, are the hobbyists that lose a little part of their soul when a real estate agent earns a commission."

Actually, on these forums, the truth is that hardly anyone really cares (given that most simply do one-and-done drive-by's on their questions). Personally, I find the topic interesting, and of more-than-passing-interest considering the amount of money that I have paid in commissions and some of my less-than-encouraging personal experiences.

On a somewhat related "have you noticed?" tangent...

While it is true that there is a small core of persons posting on these forums from the "non-pro" perspective, it's also true that there's also a fairly small contingent of RE pros who seem to be offended/irritated/concerned enough by our perspectives to take time out of their day to harangue at the RE wanna-bes in the peanut gallery. And, so, the circle gets ever smaller.

"Of course, and amazingly, it's only "they" who need to do things a certain way; "we," of course, are capable of making our own choices in life. I still don't understand real estate site commenting as a hobby!"

On the off chance that you would like to understand...

Initially, I just wanted to get information on mortgages. Not so much interested on the buy/sell "help me" posts. But, I started to notice that very few people would say "you're not ready, you should wait", or anything else that implied that "now" was not "the best time to buy". An over-generalization, but hopefully you'll let this one slide.

Any-hoo...just thought that there was no reason why a consumer's voice should not be added into the mix. So..."hobby" it is.

"In real estate, who gets to say, and under what conditions, "I know you can get a loan, but I can't in good conscience allow you to buy this house?""

In real estate, or in any other situation where an individual should bear the responsibility for their own decisions, no one should be able to prevent an individual from the inherent right to make their own decision, for good or bad. I have several times told clients in my line of business "Personally, I believe you are making a small/significant/huge mistake. But, if after listening to my concerns you are still intent on pursuing this line of action, I will help you to the best of my ability".

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October 04 2013
- Actually, on these forums, the truth is that hardly anyone really cares 

Ain't that the truth!

- But, I started to notice that very few people would say "you're not ready, you should wait", 

- no one should be able to prevent an individual from the inherent right to make their own decision, for good or bad.

Well, there you have it.



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October 04 2013
I can't stop hearing the chorus of a song in my head when I read this thread. Carlos Santana performed it, and in hindsight it may have been in honor of Charlie Sheen. I'll let y'all guess the song I'm hearing.

On a more serious note, the "speedbumps" are the Mortgagee's problem.

The us vs them environment could result from language such as "shell games...callous disregard...predatory....stereotype of the occupation.... that received one thumbs up. I can't imagine who may have given that commendation.

If either/any of you actually think that REA's (in particular Buyers Agents) caused the greed fueled by the easy money, rather than the easy money causing the greed, that the marginally equipped home-buyers took full advantage of, meanwhile catching the RE Salespeople in the middle of (again the few BA's in particular) , then you're drunk or delusional.

There was much greed churning by Listing Agents in the more lubricious markets, but they were not slandered in this discussion. And, oh by the way, Buyers Agency, was practically ignored during the bubble. Buyers called the Sign, and insisted on being served, and now damnit. They couldn't care less who was representing whom or any of those little details, trust me, I was on the ground fighting (as an EBA), not in an ivory tower watching. But I digress, y'all know best..
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October 05 2013
Profile picture for Pasadenan
"If either/any of you actually think that REA's (in particular Buyers Agents) caused the greed fueled by the easy money, rather than the easy money causing the greed, that the marginally equipped home-buyers took full advantage of, meanwhile catching the RE Salespeople in the middle of (again the few BA's in particular) , then you're drunk or delusional." -

I may be delusional, but I ain't "drunk".  Personally, I don't think the issue was Real Estate agents, but rather NAR, providing false statistics, misleading national advertising, and a lot of false and misleading "talking points" such as "no one ever loses money on Real Estate", and then expecting their membership to just repeat such slogans without any thought or consideration.  And NAR's lobbying of Congress and HUD for the policy changes that allowed nothing down loans in the first place didn't help either.  Certainly not all buyer's agents blindly repeated NAR talking points, but from some of the Realtor posts on this website, apparently some did.

No, I don't expect "sales people" to talk people out of a sale.  Nor do I expect most sales people to have enough knowledge of any client's financing to be offering any financial advice nor investment advice, nor even info on the potential risk of buying any given property.  After all, they are not licensed as investment advisers, they are licensed for "sales".

And yes, I did advocate for nothing down loans and no closing costs for a very specific situation and criterion.... where changes to city policy for maintenance and city services was likely to cause gentrification, increase of rents and possibly force long term residents out of the community, the city should provide loan assistance so that the long term residents could buy out the landlord and have more control of their housing, converting the apartments to ownership condos with an association.  It didn't happen; and I have not checked the rent rates since, but some of the neighboring ownership housing increased in value by a factor of over 3 times in less than 3 years, and some of the rents in some neighboring communities increased by over 50% in less than 7 years.

If someone is planning on staying in a community, and the prices are rising much faster than income, it often does make economic sense to lock in a mortgage rate and purchase rather than to be at the mercy of landlord rent increases, even if that means it will be a financial stretch; even if that means one has to look for closing cost assistance either from a non-profit, a government agency, or a seller in order to roll it into the mortgage.
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October 05 2013
I know this will be hard to swallow but I didn't realize that you (pasadnenan) were even involved in this thread. I certainly wasn't aiming the sarcasm hose at you.

Here's the cold hard truth. The Computer Industry caused the Housing Bubble and the resulting manic recession. Unequivocally and without doubt.
Greedy Evil Ba$tard$.

"Information Age" equates to "chaos and economic collapse"?!
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October 05 2013
"The problem of 2007, to my mind, was in Wall Street mispricing the risk and being undercapitalized for their exposure in the market place. Am I directing blame away from real estate agents? No, not really."

the actual problem that ended in 2007 started over a decade earlier when president Clinton passed a little known law which required half of all loans to be given to individuals under a certain income level.  Amazingly, as it turned out, many of these lower income-higher risk citizens ending up defaulting on there loans in the following years. 

 Lets think about this... if you were required to invest 50% of your money in high risk securities the law of averages will eventually break you, even know short term you could very likely see incredible gains. This happened, through the 90's and into the early 2000's large gains on real estate were made, but the risk eventually caught up with the reward in 2007!!

The intention was good, allowing ppl who likely wouldn't of been able to afford homes, buy now pay later.... However, as most of us know you can't build a brick house on a foundation of glass

  
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October 05 2013
What was that law again, Jarrid?

- Personally, I don't think the issue was Real Estate agents, but rather NAR

NAR is a pro-business lobby that also supports the razing of pristine farmland and forest for building housing. They're still not the ones to blame.

This isn't difficult, folks. Discounting is intended to move product, and everybody in the chain of sales wants to move product. If lower interest rates will do it, if easier credit terms will do it, if accepting defective / falsified loan applications will do it . . . what is Gresham's law again, bad money pushes out good?

If you offer deadbeats zero down loans with start rates of 0.99%, some of them are going to take it - and they're not the ones who lost anything. The home buyers who lost were the "responsible" ones who put their own money into the deal. 
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October 05 2013
Profile picture for Pasadenan
"but I didn't realize that you (pasadnenan) were even involved in this thread" -

25th post on the Thread, 2 days ago; and read several of the posts at least a few days prior to posting, and did provide at least 2 thumbs up.

As for computer industry?  Computers are just tools no different than a tape measure or hammer or skill saw.  The computers do nothing without instructions and operators.  And I'm not in the computer industry, so it doesn't matter to me.

But certainly, the computer industry was not lobbying for nothing down loans and other related bad fiscal and housing policy.
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October 05 2013
Profile picture for SoCal Engr
"What was that law again, Jarrid?"

I'm obviously not Jarrid, but...

My reading on the topic points to not any singular law, but to a series of policy decisions, with the Community Reinvestment Act playing a significant and prominent role.

You can read about this perspective here, or here,

The bottom line to all of the CRA yadda yadda appears to be...

"Loans for purchasing houses became an integral part of social policy, and predictable results followed."
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October 05 2013
I think the details matter here. What's the yadda yadda yadda?
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October 05 2013
Profile picture for SoCal Engr
"I think the details matter here. What's the yadda yadda yadda?"

My bad. Personal shorthand for "all of the varied commentary in the different articles/essays/opinions I have read on the topic".

To somewhat tie the current tenor of the posts back to the original question, there appears to be a general consensus that the mortgage meltdown was a predictable outcome of the government stepping in to "transform" otherwise-unqualified-applicants into qualified-borrowers.
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October 05 2013
Well, no . . . this has come up in other forums before, and I'd like to have somebody bring me to the root of it. As it stands right now, I'm not quite certain that "community reinvestment" types actually had much of an effect on the crisis . . . 
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October 05 2013
Profile picture for Pasadenan
"I'm not quite certain that "community reinvestment" types actually had much of an effect on the crisis . . ." -

Obviously Angelo Mozilo's Countrywide was not headquartered in your city...
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October 05 2013
But that's not really an answer, is it?
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October 05 2013
Profile picture for Pasadenan
A 200 page dissertation would not be sufficient to explain it to you, even if you had the ability to comprehend it.  And I certainly don't intend to write a 200 page dissertation that is off the topic of the thread title, just because you "asked for it".

Besides, the "links" already answered your irrelevant question.  If it concerns you so much, you should start your own thread discussion or question on that topic.
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October 05 2013
There we go being divisive. The brains of the community are showing their (and they're) asses. Angelo Mozilo was not a community reinvestment banker type himself. He may have been blowing several of them, or vice versa.  It would take 200 pages to tie him to the CRA, in any way, without using the words golf course, gents club, or hookers.

The CRA was an excuse. The computer tool facilitated the advent of the lazy to a multiverse of complex activities that were just outside their exercise regime, before the PC was added to toolbags. Ironically, the PC replaced too many actual toolbags. That's all I'm saying about that. I'll let the supertools do the 200 pages. Wield on, so-much-wiser-than-the-masses types. Your explanation of how wrong I am will prove my case eloquently. Thanks in advance.

"Software Engineers" equate to "toolbags" of excuses for people to "screw stuff up"?
Was dotcom bubble an echo or the fart that inflated the housing zeppelin!
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October 06 2013
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October 06 2013
Profile picture for Pasadenan
Not to be confused with "Community Redevelopment"; a "HUD" program for the destruction and replacement of existing communities, with federal matching grant subsidies, and the pocketing of cash and power by political entities and 501C3 groups and administrators.

Community Redevelopment Areas also end up with "block grant" funds to spend, and in California, the increase in property tax due to reassessment must be spent in the Community Redevelopment Area, rather than going to the County or State, thus intentionally stealing money from the local schools.

Bad economic policy is "bad" regardless of which entities lobbied the legislature and government agencies for it.
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October 06 2013
- the actual problem that ended in 2007 started over a decade earlier when president Clinton passed a little known law which required half of all loans to be given to individuals under a certain income level.  

- "Economist Stan Liebowitz wrote in the New York Post that a strengthening of the CRA in the 1990s encouraged a loosening of lending standards throughout the banking industry."

"loosening," or, "half?"

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October 06 2013
Profile picture for SoCal Engr
Well...it seems that this thread may have outlived it's potential.

@Hamp ... The computer/software/dotcom gambit was entertaining.

@Mack ... I've asked before, I'll ask again. At some point-in-time, doesn't the entertainment value of baiting individuals lose it's luster? Especially when it's pretty-much-a-sure-thing?

@Pasa ... One day, maybe, you will learn how to play nice with others. As a start, consider the possibility that whenever the phrase "you ..." is employed, the line between "discussion" and "personal attack" is crossed, and license is given to dismiss any salient points that might have been made.
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October 06 2013
Well, I was really talking to Jarrid before buttinski butted in. I have put forth that the source of the crisis was mispricing risk, Jarrid countered by putting the finger on the CRA that required half of all loans to be given to lower-income, higher risk borrowers. You put forth that the CRA played a significant role, which isn't quite the same as, half.

Half would be eye-opening to me, and it would surely affect my opinion if it were true.
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October 06 2013
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"I have put forth that the source of the crisis was mispricing risk, Jarrid countered by putting the finger on the CRA that required half of all loans to be given to lower-income, higher risk borrowers. You put forth that the CRA played a significant role, which isn't quite the same as, half.

"Half would be eye-opening to me, and it would surely affect my opinion if it were true."


Excerpts from the links I posted before, which themselves have footnotes and links to other sources. Bolded italics in the following are my edits...

From the Cato Journal...

Initially, the regulations required that at least 30 percent of the mortgages that the GSEs would buy had to be affordable housing loans, but over time this requirement was ratcheted up so that by 2007 the requirement was that 55 percent of all mortgages purchased by the GSEs had to be "affordable," with a sublimit of 25 percent that were required to be mortgages made to low or very low income homebuyers. In order to meet these goals, Fannie and Freddie were expected to "lead the industry in making mortgage credit available to low and very low income families." Over time, pressure from ever increasing affordable housing goals forced a profound weakening of the GSEs' credit culture.

So, by the middle of 2008, there were almost 27 million subprime and Alt-A loans in the U.S. financial system. This amounted to almost 50 percent of all mortgages. More than two-thirds of these mortgages were held or guaranteed by government agencies like FHA (about 4.8 million), and the GSEs Fannie and Freddie (12 million loans), and by U.S. banks (a residual of about 2.2 million) that were required to make them under the CRA. This is a vitally important fact, because it shows that the underlying cause of the large number of subprime and Alt-A mortgages in our economy was not the lack of regulation at the origination level but the government's own demand for these loans.

Accordingly, a strong argument can be made that the financial crisis was not caused by unregulated mortgage brokers, or by the rating agencies, the Wall Street investment banks, or the commercial banks that eventually had to be rescued with taxpayer funds. The responsible parties were those who made and sustained government policies that distorted the housing finance market—resulting in the creation of an unprecedented number of high-risk mortgages. Fault also rests with the management of Fannie Mae and Freddie Mac, who failed to disclose that they were complying with government requirements by acquiring and securitizing vast numbers of high-risk mortgages.

From the Pinto analysis...

In 1992 the interests of Fannie, community groups, and Congress converged resulting in the passage of GSE Act. Fannie got its wish as the GSE Act formalized its strategy of using affordable housing to protect its key charter privileges – protection that would last until 2008, two months before it and Freddie would be forced into conservatorship. The community groups got their wish now that Fannie and Freddie were required to loosen underwriting standards in support of CRA. Congress got its wish by moving the affordable housing mission largely off-budget and at the same time, placing itself in a position to take credit for the affordable housing activities of Fannie and Freddie.

Compared to the United States, Western Europe‘s housing finance systems were neither uniform nor standardized. The absence of the equivalent of a Fannie, Freddie, or HUD throughout Western Europe goes a long way towards explaining how it avoided the worst effects of the housing decline while the U.S. did not. It is relevant that the U.S. ended up with almost half of all outstanding loans being NTMs, loans with weak loan characteristics.

When the financial crisis hit in full force in 2008, approximately 26.7 million or 49% of the nation‘s 55 million outstanding single-family first mortgage loans had high risk characteristics, making them far more likely to default. Each of these high risk characteristics represented a weakening of one or more of the traditional "Three Cs of Mortgage Credit".

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October 06 2013
Helping with closing costs is a very good idea.  Back in the late 90's I worked with first time homebuyers.  In just about every case I got the buyer a closing cost credit.  When representing sellers I tell that it's good for the seller as the buyer knows that they wouldn't be using most of their money.  You can always figure the buyer CC in the purchase price of the home.
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October 06 2013
Without arguing the merits of reports from the Cato Institute, we could spend a lot of time discussing what made a loan UN-affordable - for example, falsifying compliance with underwriting standards.

What I'm trying to find out, preferably from Jarrid, is more about the CRA requirement that half of all loans were to be given to individuals under a certain income level. Also, what that certain income level was.

Because, look. If that income level was, say, $30,000, at 6.5% and the FHA front end ratio of 31%, that's about a $125,000 loan. The median house price in 2005 was about $230,000 . . . can we calculate what percentage of failed loans would have had to be made to people below that "certain income level" in order to crash the system?
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October 06 2013
@Hamp ... The computer/software/dotcom gambit was entertaining.

Thank goodness I achieved my major goal in this embarrassing adventure. That would be to provide a mildly entertaining counterpoint to the discussion.

The whole CRA dissection being infotaining etc... hardly relates to blaming REA's for optimizing the crazyass rules in favor of Buyers who wanted the crazyass rules to be optimized in their favor. The GSE escalation of "affordable" product wasn't done solely to placate the NAR. It was done, at least in part, to respond to loss of share to Wall Street private label subprime products. As I said before, the CRA was kind of an excuse and a tacit OK from the FedGov't. That part of the effects of CRA (33% to 55% risky product) was reactive to private competition. That should be added as if any of it matters to anybody but us five or six obsessive's. The FedGov't was so housing boom drunk that the talk of replacing Treasury Securities with MBS' was floated and considered. The FedGov't ( and A Greenspan) was apparently hypnotized by the NAR and Wall Street. Computers made it all possible. Without computers we'd have to hire foreigners to do the math and the whole biz model chokes to death. The last three point five decades actually represent consecutive overlapping technology bubbles. Bah hah hah!!!

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October 06 2013
Profile picture for Pasadenan
""loosening," or, "half?"" -

BOTH; loosening the standards for all mortgage underwriting; "half" the loans going to "extremely low", "very low", "low" or "moderate" income applicants.

To qualify for the subsidies, it depends on the median income in the Metropolitan Statistical Area of the purchase for a family of 4; and the income level of the applicant and size of the household.  There is a cost adjustment for different number of members in the household.  "moderate" income is defined as 80% to 120% of the median for the MSA.

I believe low is 60% to 80% of the median for the MSA; but I forgot and don't feel like looking it up presently.  It is on the HUD website if anyone cared.  It is also on the State law websites, as allowing for and encouraging "affordable housing" (meaning government subsidized and/or controlled), is mandated of the States by HUD.  And the States mandate it of the Cities and Counties.  In this area, we have a "San Gabriel Valley Association of Governments" that divvies up the state mandated allotment.  Of course, if you have no "extremely low", "very low", "low" or "moderate" income households in your city, your city is not required to provide any means for such new housing, as they only need to provide for an extrapolated expected growth of the existing population distribution.  (For example, San Marino; 91108).  Never mind that the State mandated growth numbers are unrealistic, designed to bring in additional Federal money, and doesn't relate to the actual census numbers; but they have to project on some basis in between the 10 yr censuses.

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October 06 2013
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